Weighing the Options of Refinancing

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Ever heard the pearl of wisdom that states you should only consider refinancing if your new interest rate will be at least 2 points below your present one? That could have been accurate a while back, but since refinancing has been costing less recently, it's a good time to think about a new loan! A refinanced mortgage may be worth its cost many times over, considering the advantages that come, as well as a reduced interest rate.


You might be able to lower your interest rate (sometimes by a lot) and have smaller mortgage payments with a refinanced mortgage loan. You could also have the option to "cash out" a portion of your equity, that you can use to take care of higher interest debt, make home improvements, or take a vacation. With reduced rates, you might also get the chance to build up home equity faster by moving to a shorter term mortgage loan.

Fees and Expenses

Of course, you will have some fees and expenses during the the refinance process. When you refinance, you're paying for many of the same things you paid for when you obtained your existing mortgage. Among these may be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.

Do the Math

You might need to pay points (prepaid interest) to gain a more favorable rate of interest. If you pay (on average) three percent of the mortgage loan amount initially, the savings for the term of the new mortgage can be substantial. You might have heard that these points may be tax deductible, but since tax regulations can be difficult to keep up with, please consult with a tax professional before depending on this.

One more expense that borrowers might take into account is that a lower interest rate will reduce the interest amount you'll deduct on your federal income taxes. We can help you do the math! Call us at (207) 571-8034.

Most borrowers find that the monthly savings balance out the initial cost of refinancing. We will help you find out what mortgage program is perfect for you, taking into account your cash on hand, the likelihood of selling your residence in the next few years, and the effect refinancing will probably have on your taxes. Call us at (207) 571-8034 to get you started.

Want to know more about refinancing? Call us at (207) 571-8034.